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PurposeThe purpose of this study is to examine how foreign venture capital firms affect the internationalization of investee ventures and their performance. The author argues that, as influential stakeholders, foreign venture capital (VC) firms engage in strategic decisions of investee ventures and may positively contribute to ventures' business in foreign markets.Design/methodology/approachThe study examines 551 VC-backed ventures that went public between 2000 and 2014 in the US. Logistic regressions and generalized linear models are used to test hypotheses, and the two-stage approach is used to address a potential endogeneity issue.FindingsIn the empirical results, the author finds that foreign VC investment is positively associated with the internationalization of ventures in terms of both the likelihood of internationalization and foreign sales intensity. In addition, the author finds that internationalization and foreign sales intensity are positively associated with firm performance when a venture is backed by a foreign VC firm.Originality/valueThis study makes important theoretical and empirical contributions to the international entrepreneurship literature by highlighting the role of foreign VC investors on internationalization of ventures.

Corporate venture capital (CVC) investment has increasingly become an important source of entrepreneurial finance. Accordingly, while scholars have traditionally focused on understanding the main motivations behind CVC activity and its impact on the investing corporate firm, more recently, scholars have also started to emphasize the importance of understanding the impact of CVC investment on the investee venture. In particular, these recent studies commonly show that CVC investment has a positive effect on the venture's innovation. While the positive link between CVC investment and the venture's innovation output is well established in the literature, the organizational mechanisms through which this relationship unfolds within the venture remain relatively underexplored. In this study, we fill this gap in the literature by examining the effects of CVC ownership, founder incumbency, and the CVC investor–founder interaction on research and development (R&D) investment strategies in venture capital (VC)-financed, technology-based entrepreneurial ventures. In doing so, we aim to provide a novel explanation of the organizational mechanisms that lead to greater investment in research and development (R&D), especially with regard to the interaction between CVC investors and founder managers. We argue that CVC ownership and founder incumbency positively affect entrepreneurial firms' R&D investment and, more importantly, that the CVC ownership effect is effectively amplified when the founder is an incumbent top manager because of goal congruence and knowledge spillover from the CVC firm. Our empirical analysis supports our hypotheses while addressing potential endogeneity concerns. Our results also support various mechanisms by utilizing the data on CVC investor's board membership, CVC investor heterogeneity, the founder's technological background, and the investee venture's industry. The online appendix is available at https://doi.org/10.1287/orsc.2017.1133 .